Andrew Maykuth, Inquirer Staff Writer

Posted:
Sunday, November 22, 2009, 12:14 AM

RENOVO, Pa. - For decades, natural-gas drilling has been part of the landscape in Sproul State Forest, a vast timberland in northern Pennsylvania pocked with hundreds of shallow wells and crossed by pipelines.

But Douglas J. D'Amore, the Sproul district forester, was unprepared for the massive size of the drilling operations that have moved into his forest in recent months to tap into the Marcellus Shale, the deep formation whose bountiful yields have triggered a frenzy that is transforming the way Pennsylvania's public lands are managed.

"Just the scale of this Marcellus thing is much bigger than anything I've ever seen," D'Amore said.

Anadarko Petroleum Corp. carved out four acres of red oak and maple forest, leveling a well pad about the size of three football fields to erect a 200-foot-tall drilling rig. The directional rigs are essentially mobile industrial operations: Each requires 80 trucks to transport, and it takes about a month to bore into the shale about 8,000 feet below.

Early-season bow hunters returning to their favorite spots this month were shocked to discover that Anadarko had already cleared about a dozen well pads in Sproul. Active rigs are posted as off-limits to hunting, and security staff ask anybody approaching the sites for identification.

"I'm sure I'll have a lot more complaints when deer-hunting season starts," after Thanksgiving, D'Amore said.

This is only the beginning.

Thus far, only three Marcellus wells have been completed on state forestland. But 660,000 acres of state forests are under lease, and state Department of Conservation and Natural Resources officials expect a rapid escalation in drilling.

"A year from now, there probably will be a hundred wells operating where there are only three now," said James R. Grace, DCNR's deputy secretary for parks and forestry.

Foresters, whose staffs were cut last month because of the state budget crisis, are girding for a management nightmare. The forestry bureau now monitors a few dozen drilling operations a year.

"We're going to go from 30 wells drilled a year to 800 wells a year," Grace said. "It's a whole order of magnitude."

Though geologists long have known that the Marcellus Shale contains natural gas, improvements in horizontal-drilling technology have made the formation suddenly accessible.

With vast reserves of Marcellus gas now in play, the economics of drilling on state land has changed dramatically in just a few years.

In 2002, DCNR offered 218,000 acres of gas leases in northern Pennsylvania for bids. The gas industry protested the then-exorbitant rate of $30 an acre and declined to bid for most of the tracts. Only a quarter of the acreage was leased.

Now, DCNR is seeking bids by Jan. 12 for six tracts totaling 32,000 acres and is asking at least $2,000 an acre.

"That's how much the world has changed in the last few years," Grace said. "Somebody would have made a killing if they had bid on those tracts in 2002."

Until 2007, the state's Oil and Gas Lease Fund had generated $153 million over five decades. Currently, there are about 750 producing wells on state land.

Last year, in a single auction of new leases, DCNR generated $166 million from 74,000 acres, surpassing the total generated in the previous 53 years. One of the tracts fetched $5,837 an acre.

Once the wells start producing, the state also stands to earn hundreds of millions of dollars from royalties, which are payments based on the market price of gas produced. Most of the old leases provide for the state to receive 12.5 percent in royalties, but in the latest round the state is asking for 18 percent.

With the state in a fiscal bind, elected officials see salvation in shale. The legislature this year ordered DCNR to generate $60 million by leasing more land.

Conservationists say the legislature's mandate is a fundamental change in the way the state manages its forests for multiple uses, tilting the balance away from recreation.

"We don't believe the state forest system ought to be viewed as a cash cow for the state budget," said Jan Jarrett, president of Citizens for Pennsylvania's Future.

Jarrett called for a moratorium on gas leases until the state can assess its ability to manage the rush. "We ought to put on the brakes until a study can be conducted to analyze what kind of impacts the drilling is having," she said.

In Sproul State Forest, whose 305,000 acres cover much of Clinton, Centre, and Cameron Counties, officials said the early impact of Marcellus drilling was substantial, even though the leases limit well sites to about one per square mile.

Anadarko has fully cooperated with state officials on well locations to minimize damage, said D'Amore, the district forester. "If we want something done, it's done," he said.

On a tour last week, D'Amore pointed out gravel roads that Anadarko had repaired and upgraded, often without prompting.

"They anticipate problems and fix them before we bring it up," he said.

The huge increase in vehicular traffic, including fleets of trucks that bring in water used in the drilling, has already caused problems.

The Marcellus Shale must be blasted into fragments with high-pressure fluid to liberate the gas trapped in the rock. The hydrofracturing process can use millions of gallons of water, requiring hundreds of trucks, including those that take the wastewater away for treatment.

"Traffic control is going to be a major issue," D'Amore said. Anadarko has agreed to reduce truck traffic during the hunting season, the peak period for recreational use, he said.

Unlike the small, undercapitalized drillers who developed shallow wells in the past, the companies that have the deep pockets to develop the Marcellus Shale seem less likely to take shortcuts, Grace said.

"If they have a problem, they spend their way out of it," he said of Anadarko, which is based near Houston and has operations around the world. A single well costs $4 million to develop - each four-acre well pad may contain six or more wells - and a rig costs $50,000 a day to operate.

"They have a lot at risk," said Grace. "If they do something wrong, they can be shut down."

Chris Doyle, general manager of Anadarko's Appalachian Basin operations, said the company was comfortable working with public agencies.

"We have a very good relationship with DCNR," Doyle said. "The advantage of working with a public agency is that they control large tracts, so you're dealing with a single landowner."

D'Amore said gas development was taking a toll on the forest service. His assistant forester, Richard Kugel, spends more than 90 percent of his time dealing with gas-lease issues, such as siting new wells and estimating the costs the drillers must pay when timber is cleared for wells and pipelines, he said.

But D'Amore had to lay off 12 hourly workers last month and reduced his salaried staff by two, to 23.

"From my standpoint," he said, "this is a no-win situation."

The drilling doubtless will impair the forest, D'Amore said, and his department is seeing little direct financial benefit.

"I've got to protect the environmental integrity of the forest, but I also have to protect the commonwealth's financial interests - the state is getting 12 percent royalties from this.

"Would we rather they not be here? Yeah. But they've got a valid contract."

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